What Can Kill Your Loan After Going Under Contract in Los Angeles

What can kill your loan after going under contract in California?

A conditional loan approval means your lender reviewed your finances and approved the loan with conditions. Those conditions include a final review of your employment, assets, credit, and the property itself. Until the lender issues a clear to close, your approval can be pulled. In California's 30 to 45-day escrow period, buyers have more time than they realize to unintentionally derail their own financing.

You went under contract on a home in Los Angeles. Your agent sent a congratulations text, your lender emailed the conditional approval, and for a moment it felt like the hard part was done.

It isn't.

Going under contract with a conditional loan approval is not the same as having a funded loan. In California, the typical escrow runs 30 to 45 days. Your lender will verify your employment, credit, and assets again before funding, sometimes the day before closing. What you do (and don't do) during that window directly affects whether your loan actually closes.

Here's what trips up buyers in the Hollywood Hills, the Westside, and across Los Angeles during escrow.

The Gap Between "Approved" and "Clear to Close"

When your lender issues a conditional approval, it means they've reviewed your application and believe you qualify, pending verification of a few things. Those conditions typically include final employment verification, a clean appraisal, title review, and confirmation that your financial picture hasn't changed since you applied.

The critical phrase is "hasn't changed."

Lenders don't just trust that nothing changed. They check. Most lenders run a soft credit pull within three to five days of funding, verify employment by calling your HR department directly, and scrutinize large bank account deposits. Any change they find can pause or end the loan.

What Gets Buyers in Trouble During Escrow

Changing jobs. This is the most common loan-killer I see. Even a job change that looks good on paper (a promotion, a higher salary, a move to a better company) can freeze an underwriting file. Lenders need to verify income based on your employment history, and a new employer changes the picture. If you go from W-2 to self-employed, it's even more serious: lenders typically require two years of self-employment history before they'll count that income.

If a job change is unavoidable, tell your lender immediately. Don't wait until they find it.

Opening new credit accounts. Financing furniture, buying a car, opening a retail credit card for a 10% discount. Any of these adds a hard inquiry and potentially new debt to your profile. New debt changes your debt-to-income ratio. For jumbo loans in Los Angeles, where even a small DTI shift can push you past the lender's threshold, a new car payment can kill the transaction.

Do not apply for any new credit from the moment you go under contract until the loan funds.

Large unexplained deposits. If your bank account shows a large cash deposit (even one that's completely legitimate, like a gift from family for the down payment), your lender will want to document its source. Gift funds require a gift letter and a paper trail. Cash deposits from an undocumented source can cause the underwriter to exclude those funds entirely.

Move any needed gift money before you go under contract, or be ready with full documentation the moment it arrives.

A drop in your credit score. A single missed payment, a collection that hits your report, or a maxed-out credit card can lower your score enough to push you below the loan's minimum threshold. For jumbo loan products at the $2M to $5M range common in Beverly Hills and Studio City, the lender's credit floor is strict. A five-point drop can be the difference between funded and failed.

Pay everything on time. Don't close existing accounts. Closing them shortens your credit history and can lower your score too.

Large withdrawals from your down payment accounts. Your lender documented your assets for a reason. If the funds in your verified accounts drop significantly before closing, the lender needs to understand why. Moving money between accounts during escrow is fine as long as you document every transfer.

If you're currently under contract in Los Angeles and have questions about what your lender expects during this window, reach out. I walk buyers through this every week and can help you avoid the mistakes that end deals at the worst possible time.

What the Lender Does During Escrow

A lot of buyers assume the lender reviews their file once and then moves to processing. That's not how it works.

Underwriters work through conditions one by one, often in stages. As you get closer to closing, they verify your employment by contacting your employer directly. They often run a credit refresh (a soft pull that updates your credit report). If they see anything new, the loan goes back to underwriting.

For jumbo loans, which are standard at the price points most LA buyers are dealing with, the scrutiny is tighter. Portfolio lenders who write their own guidelines have more flexibility, but their review process is just as thorough. Some jumbo lenders require a second full financial review in the final week of escrow.

Your rate lock also expires on a specific date. If the loan doesn't fund before the lock expires, you either pay to extend it or relock at current market rates, which can change your payment meaningfully.

Property-Side Issues That Can Derail Funding

Not everything is about you. The property itself can create financing problems.

An appraisal that comes in below your purchase price gives your lender a problem: they can only lend against the lower of the purchase price or the appraised value. At a $3M sales price with a $2.7M appraisal, you suddenly need $300,000 more in cash or a renegotiated price. The LA appraisal gap scenario is covered in full detail if you want the breakdown of your options.

Title issues (undisclosed liens, ownership disputes, unresolved judgments against the seller) can also pause or end funding. The title company works through these in parallel with your lender during escrow, but a complicated title situation can push your close date past your rate lock.

If you're buying in a high-fire-risk area, some lenders require proof of homeowners insurance before they'll fund. With the current insurance market in LA, that proof can be hard to come by. Getting insurance lined up early in escrow is worth doing before it becomes the last thing blocking your close.

Before you do your final walkthrough and hand over your certified funds, your lender should have already issued the clear to close. If they haven't, ask why.

Frequently Asked Questions

Can my loan be denied after I go under contract in California?

Yes. A conditional approval means your lender has reviewed your initial application and believes you qualify, with conditions still to be verified. If your financial situation changes during escrow, or if the property doesn't appraise, the lender can pull the approval. This is why major financial changes during escrow carry serious risk.

How long is the loan contingency period under a California purchase contract?

Under the standard CAR Residential Purchase Agreement, the loan contingency period is 21 days, though this is negotiable. If the buyer doesn't actively remove the contingency or the seller doesn't send a Notice to Perform, the contingency stays in place. If you're in a competitive situation where you waived or shortened the loan contingency, you have less protection if the loan falls through.

Can I change jobs before my loan closes in California?

Not without telling your lender first. A job change (even a promotion or salary increase) can pause your underwriting and potentially jeopardize the loan. Going from W-2 employment to self-employment is particularly risky and may require a full re-underwrite. If a change is unavoidable, notify your lender the same day.

What happens if the appraisal comes in low during escrow?

Your lender will only loan against the appraised value, not the purchase price. This creates a gap the buyer has to cover in cash, negotiate with the seller to close, or challenge through a request for reconsideration of value. If your appraisal contingency is still in place, you can also cancel and recover your deposit. If you waived it as part of a non-contingent offer, you don't have that option.

Does the lender check credit again before closing?

Most do. Many lenders run a soft credit pull within a week of funding to verify that nothing changed since the original approval. If new debt or a negative event appears, underwriting can pause the loan. Jumbo lenders are often even more thorough, requiring a full financial refresh in the final days before closing.

The 30 to 45 days between going under contract and sitting at the closing table feel routine from the outside. Inside the escrow, there's a lot happening, and buyers who treat the approval as a done deal are the ones who get surprised at the worst moment. Keep your financial life quiet, stay in close contact with your lender, and get ahead of anything that might need explanation.

About Paul Blair Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas, Los Angeles and Houston. With 22 years in the business, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.